Super Retail Group Ltd and Trade Me Group Ltd: Beaten down top stocks to buy today

Investors need to strike when opportunities present themselves.

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Super Retail Group Ltd (ASX: SUL) and Trade Me Group Ltd (ASX: TME) have both sunk to fresh 52-week lows today with Super Retail showing a decline of 23% for the year and Trade Me close behind, down 20%.

Investors would have been better off simply owning a proxy for the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) which has gained nearly 12% rather than either of these two leading companies.

According to research provided by Morningstar, consensus forecasts have Super Retail earning 59 cents per share (cps) this year and 66.3 cps in FY 2015. Meanwhile Trade Me is forecast to earn 19.6 cps this year and 21.4 cps in FY 2015.

Based on these forecasts the stocks are trading on current price-to-earnings (PE) ratios of 14.6 and 16.2 respectively.

Super Retail recently provided trading guidance to the market which showed like-for-like sales growth had been achieved within each of its three operating divisions over the 44 weeks to May. While investors were no doubt pleased to see growth not declines, it appears investors were underwhelmed by both the growth rates and the gross margins.

Meanwhile Trade Me has issued a “subdued” full year profit outlook, as the company continues to invest in strengthening its online classifieds business. Given the company has previously been described as New Zealand’s answer to Amazon.com, investors have obviously become accustomed to expecting much higher growth rates.

In the case of Trade Me, current re-investment into the business has the potential to pay-off in future years if the company can leverage its customer base successfully. The stock is now trading more in-line with a low growth industrial stock than a high growth online media stock such as Carsales.Com Ltd (ASX: CRZ) or REA Group Limited (ASX: REA). Trade Me would appear to be a stock for investors to consider, as if management’s growth strategy works, the current price level could turn out to be a good buying opportunity.

Super Retail’s management still sees scope for the further rollout of stores and multiple opportunities to increase efficiencies within its network such as the potential to save costs through improved inventory flow. With the stock now trading at a significant discount to the market (ex-financials) multiple, on a comparative basis, Super Retail also appears to be in the buy zone.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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